Tuesday, July 17, 2007

Australian challenge to Google advertising practices - implications for Ireland?

Silicon Republic reports that the Australian Competition and Consumer Commission has launched a challenge to how Google (and, by implication, other search engines) serve up advertising with search results:

Search giant Google, including named subsidiaries in Ireland and Australia, is being taken to court by the Australian Competition and Consumer Commission over the way it sells and displays its sponsored links.

Google is being sued by an Australian body over the practice of buying adverts next to search terms.

The Australian Competition and Consumer Commission (ACCC) is alleging that Google and one of its advertisers, the Australian shopping portal Trading Post, purchased ads next to the search terms “Kloster Ford” and “Charlestown Toyota”, two of its leading competitors.

The nub of the issue is that Google failed to make it clear that these words were not “organic” search results.

“This is the first action of its type globally,” the ACCC said in a statement. “Whilst Google has faced court action overseas, particularly in the United States, France and Belgium, this generally has been in relation to trademark use.

“Although the US anti-trust authority the Federal Trade Commission has examined similar issues, the ACCC understands that it is the first regulatory body to seek legal clarification of Google's conduct from a trade practices perspective.”

The ACCC says it has instituted legal proceedings in the Federal Court, Sydney, against Trading Post Australia Pty Ltd, Google Inc, Google Ireland Limited and Google Australia Pty Ltd alleging misleading and deceptive conduct in relation to sponsored links that appeared on the Google website.

“The ACCC is alleging that Trading Post contravened sections 52 and 53(d) of the Trade Practices Act 1974 in 2005 when the business names ‘Kloster Ford’ and ‘Charlestown Toyota’ appeared in the title of Google-sponsored links to Trading Post's website. Kloster Ford and Charlestown Toyota are Newcastle car dealerships who compete against Trading Post in automotive sales.”

The ACCC is alleging that Google, by causing the Kloster Ford and Charlestown Toyota links to be published on its website, engaged in misleading and deceptive conduct in breach of section 52 of the Act.

It is also alleging that Google, by failing to adequately distinguish sponsored links from “organic” search results has engaged and continues to engage in misleading and deceptive conduct that breaches Australian law.

Google Australia has described the lawsuit as an attack on all search engines and vowed to defend itself.

Google has won similar cases in the US courts brought by car insurance company Geico and IT support company Rescue.com.

The search giant lost a case in France whereby a fashion company accused the company of running links to counterfeit goods alongside legitimate results.

A US home furniture company, American Blind & Wallpaper Factory, is currently embroiled in a legal battle with Google alleging searches for the company brought up sponsored links brought by competitors.

While the ACCC press release and the stories about it aren't entirely clear, it seems that three separate issues are involved - (a) the use of competitors' names / trademarks as keywords to trigger advertising; (b) the use of those names / trademarks in the advertisement itself; and (c) whether the search results make clear the distinction between paid advertisements and "organic" search results.

How significant is this challenge from an Irish law perspective? Issues (a) and (b) have already been heavily litigated elsewhere, and I've discussed them in an article on keywords and metatags (with Paul Lambert). In that article we point out that in Europe the courts have leaned against the use of competitors' trademarks in the text of advertisements and have generally prohibited the use of competitors' trademarks as keywords. Consequently search engine policies here already refuse to allow the use of competitors' trademarks in the text of advertisements, and either refuse to sell trademarks as keywords or impose restrictions on so doing. To that extent it's unlikely that this ACCC action will have any great effect here. It is true that the majority of cases to date have been taken from a different legal perspective (trademark infringement or passing off rather than trade practices) but the issue is essentially the same regardless of the legal theory - have consumers been deceived as to the affiliation of the result?

Issue (c) may be more interesting. What does a search engine have to do to distinguish paid from organic search results? As the ACCC points out, the industry norm is developed from a 2002 recommendation of the US Federal Trade Commission which arose from this complaint against Altavista and others. That recommendation has led to most search engines using terms such as "sponsored results" or "sponsor results" to distinguish advertising from organic results, usually with either a different colour background or a line separating the advertising from the results. However, it's frequently said that consumers still have difficulty distinguishing between them. (Although one English judge has asserted that "The web-using member of the public knows that all sorts of banners appear when he or she does a search and they are or may be triggered by something in the search. He or she also knows that searches produce fuzzy results – results with much rubbish thrown in.")

If the ACCC can establish consumer confusion between results and advertising, the outcome is likely to be that search engines will be required to take steps to further segregate advertising from results, potentially reducing click through rates and revenue substantially - and this may have knock on effects for other jurisdictions, including Ireland.